bless obama for calling it a lie. you don't want to miss it. the "kudlow report" is just moments away. mirror, mirror on the wall, who is the greediest of them all? could it be alan stanford? the mastermind of a $7 billion scam? he's tonight's american greed criminal. i don't know about you. but i'm not going to miss it. i'm jim cramer. see you tomorrow. larry, what are you looking at tonight? a little profit-taking is a good thing because in the long run, we are coming into a growth revolution that's going to blow this market sky high. good evening, everyone. i'm larry kudlow. this is "the kudlow report." top story tonight, for the first time, president obama admits he was a disaster at the debate. take a listen to what he told abc's diane sawyer that's airing just minutes ago. >> governor romney had a good night. i had a bad night. it's not -- >> bad? >> it's not the first time i've had a bad night.

>> they chant "four more years." and today, there are 28 days before the election. i think the right chant ought to be for them "four more weeks." you've got the idea. >> there you have it. also this evening, for the first time in months, the market hit a back-to-back triple-digit decline. we warned you last night earnings might give the market a little bit of a hit. go ahead, boys. take some chips off the table. nothing wrong with that. but let me tell you, a political revolution is coming in 27 days. and for the first time here on "the kudlow report," i feel comfortable to tell you, mitt romney is going to win and he's going to win big. it's going to be a reagan-like economic growth revolution. that's what the debate told me and that's what the polls are telling me. and i make it official tonight. also this evening, my old pal, art laffer, is going to blast obama and tell you why mitt romney's tax reform is

pro-growth and it will not cost anything like $5 trillion. plus, did president obama, hillary clinton and susan rice lie about the 9/11 benghazian attack? the latest sworn congressional testimony sure makes it sound that way. first up tonight, let's do some stock investigation. fourth day of losses across the board. dow dropped 129 points. is the tepid earnings season to blame or are you guys missing a political revolution which will surround the economy? let's talk. we have mike holland, david goldman and michael farr. michael, i don't care about third-quarter earnings. that is so yesterday's news. i can't stand it. that is just so yesterday's news. it's boring. it's nothing.

maybe the guidance has something to say. but the economy is not in bad shape. the economy is not in bad recessionary shape and a political revolution is coming and i want to get your take. after you get through taking profits, michael, what happens next? do you buy them back? >> i think you do a little bit, larry. i think there's certainly time to take some off the table. i'm glad we don't have to pay attention to third-quarter earnings. i've been sweating that. but 2% gdp growth after you get to an almost 10% deficit spend of $3 trillion out of deficit stimulus, it's not robust growth. what happens in this election is important. clearly people have to get out and vote. what's going to happen on this groundwork and infrastructure of our economy over the next four years is going to be crucial for future generations. >>. no, it's not about infrastructure. it has nothing to do with infrastructure. david, it has to do with mitt romney's brilliant tax reform

plan to lower the rates and broaden the base and cap the deductions. we're going to talk about that in the next segment with arthur laffer and jared bernstein. but don't you think there's potential here for a political and economic revolution? and if a pro-growth revolution comes, american entrepreneurs, american small businessmen and women are poised, they are poised to torque up the animal spirits and give this a great lift. i think people in the stock market are missing this, david goldman. >> larry, markets have never been good about predicting elections and discounted them. but the fact is, we have more capital waiting on the sidelines -- >> right. >> -- rearing to go, demanding returns, demanding income than we've ever had before. and we have a world that's hungrier for growth with half the world's population at the cusp of industrialization. so a romney presidency, in my view, would give us one of the great stock market booms in the history. absent that, if we get obama and

we get the multitrillion-dollar deficit, the u.s. bond market blows up and takes the stock market with us. >> fair enough. i agree with that. but i've already called the election for romney. at least 52-48. as long as obama dent get past 48%, he's toast. and romney's going to win. but mike holland, financial conditions are easy, maybe too easy in this country. but the united states, europe and china, financial conditions are easy and getting easier. the world economy -- i know the imf said we're having a planetary slowdown. i don't know why that's any news. we already knew that. but i don't think we're having a planetary recession, mike holland. i think that's the thing that's yesterday's story or four years ago. so right now, go ahead, take some profits off the table. that's all i see going on here. take some profits off the table. get ready to come right back in and buy them. >> i think, larry, we are looking at new highs by the end of the year in the u.s. stock

market. i think the u.s. economy a year from now is going to reflect just what you talked about, animal spirits. i think you're probably going to be right with your political prediction. i think that we will end up with people creating jobs and doing things with manufacturing and energy in this country, the likes of which we would not have predicted just six months ago. i think that we are on the cusp of something very big. >> michael farr, why wouldn't you be out there buying back energy? because romney is pro energy. romney is pro coal. romney is pro fracking. there's going to be tremendous opportunities. why wouldn't you want to buy industry? he's going to lower corporate tax rates across the board. why wouldn't you want to buy health care? he's going to end the government-run health care system. these look like very attractive sectors to me in view of what's coming politically in less than four weeks. >> until you called the election tonight, larry, i didn't know which way it was going to go. but now that you've explained that romney is going to win, then, yes, those are the sectors that i want to buy. but, larry, we still have problems here. we still have this congress

whose approval rating is as low as it's ever been and deservedly so. i think these guys are still skating by. i think they're still overrated. without leadership here -- >> let me -- larry, you're absolutely right the doom and gloom coming out of the imf is totally wrong. there are plenty of pockets of strength. you have a picture distorted by a few bad apples, like the spanish who got everything wrong. the southern european welfare states are dying. but china's doing well. germany's exports -- china's were up 10% year over year in august. >> the doom and gloom is not wrong yet. >> germany's exports -- the u.s. are up 15% year-on-year. the people who know how to do things right still show strength and if they're unleashed -- >> i want to get -- unleash. that's the key word.

president obama has kept a short leash on american business with his regulatory and tax threats. that's why this guy from florida today was going crazy. but mike holland, as an investor, how are you playing this? i see opportunities galore. i'm in a very optimistic mood tonight. but i'm laser-like focusing in. here's in election, there's a predict revolution right in front of our noses and a lot of times we don't see it. if that's remotely true, what are you buying? >> you have to own the biggest quality companies that are at the lowest possible prices given just what you talked about. having said that, i want to pile on with david's comments about the world economy. china, the second largest economy, along with the u.s., the largest economy, is going to do things after their leadership change in november which they're going to get, which is going to produce an opportunity for the biggest companies which are trading at historical low valuations and they're going to make a ton of money.

eight times forward earnings. >> mike holland, as an expert and director in china, will they continue to move in a free market direction? will the communist party when they have this new -- they're going to have a new regime going on, will they continue moving in a market direction or go back to the old way of state-owned businesses and state-owned enterprises? >> they can't go back. they have all kinds of reasons in terms of potential revolution ifs they go back. it's not going to happen. it's been unleashed. >> then that's pro growth. hang on a second, farr. mike holland, that's pro growth for china. the united states is going to have some more market forces itself. i don't know about europe, dave goldman, that's the thing. i'm not sure about europe. i think the money piles into the united states because we're going back to a market economy and the entrepreneurs' economy. >> the way you play europe is via china. at 8.6 times forward earnings, it's the cheapest market in the

world. germany is doing well but the stock market won't because the idiots in spain and elsewhere are going to drag them down. they have to get their act together. >> michael farr, best investment, on the way out, last word. >> i like the blue-chips, my microsoft, my johnson & johnson, i continue to like yum! brands and i'm buying a little family dollar. hang in there and look at the banks, too, they're cheap. >> thank you, gentlemen. i appreciate it. up next on "kudlow," paul ryan gears up for another knockout punch to the obama/biden team. we're going to have our tax and tactics smackdown. art laffer and jared bernstein. and later in the show, a story that makes my blood boil. one month since the september 11th ambassador attack that is killed our ambassador in benghazi, house republicans grilled the obama administration today. and you won't believe what really happened. a lot of news has broken. and don't forget, worldwide, i'm talking worldwide but especially in the usa, free

market capitalism, always the beth path to prosperity, may well be unleashed once again. and that is just totally bullish. i'm larry kudlow. we'll be right back. when you take a closer look... ...at the best schools in the world... ...you see they all have something very interesting in common. they have teachers... ...with a deeper knowledge of their subjects. as a result, their students achieve at a higher level. let's develop more stars in education. let's invest in our teachers... ...so they can inspire our students. let's solve this.

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in about 24 hours from you, vice president joe biden and republican vice presidential nominee paul ryan are going head to head in their only debate of the cycle. the tax discussion is going to be key. why suz president obama continue to spread falsehoods about the untrue romney $5 trillion tax cut? there is no such thing. but he calls him a liar. and that boils my blood a little bit. let's talk about this for a few moments. cnbc contributor jared bernst n bernstein. jared's got a lot at stake in this debate. >> and art laffer, laffer investments chief investment officer. i want to start with my pal, art laffer. where does this $5 trillion number come from and is it a good or bad thing, the romney tax reform? >> i think the romney tax reform is wonderful. i think what the president did was i think he looked at all the tax rate reductions and didn't realize that romney was also

proposing a huge increase in the tax base by eliminating deductions, exemptions, exclusions and other loopholes. and there are lots of them that could be eliminated that will bring it to revenue-neutral. and romney promised it would be revenue-neutral. and i believe him. i think it would be great. i don't know why obama didn't take that issue himself -- >> art, let me say first of all, it's great to see you, art. >> lovely to see you, jared. >> you guys must be very pleased. this is very much your agenda. and i get that, okay. it's not my agenda, but it's yours and i respect you for it. but let me tell you something, unless mitt romney has figured out a way to square an unsquarable circle, i'm not saying he's lying, i'm saying his numbers don't add up because he simply doesn't have the deductions, the base broadeners to offset the revenue loss. >> i could give you a couple right off the top. >> i was going to ask you to do that. >> i don't know what he's going to do, but let me tell you, taxing unrealized capital gains would do it right away.

>> he's not going to to do that. >> what about 501-3cs -- >> let him get it out. >> he's not going to do that either. >> let me tell you what he said. he's going to limit the deductions for each person. so it's across the board. >> that's the key. arthur, you just hit it. i want to put this back on the table. this is what people miss. i think that team obama misses it deliberately. arthur got it right. romney has said now on several occasions, both during the debate several times and just before the debate, he is going to put strict caps -- are you listening, jared -- strict caps on itemized deductions. those caps will range between $17,000 and probably $40,000, $45,000. the more money you make, the lower your cap is going to be. once you apply those strict caps, then the math adds up if

you get some decent growth, that is. >> one more thing, larry, the deductions are the greatest benefit at the highest tax rates. so therefore limiting the deductions at the highest rate gives you the greatest base and revenue -- >> all true, art. but here's the thing. he has taken off the table capital gains, dividends, interest deductibility, the mortgage interest deduction -- >> no, he hasn't. he has not. jared, he's said everything is on the table. jared, my friend, when asked this question, besides the specifics of the dollar limit, he has said everything is on the table. come on. that's what he said. >> he can't do that without raising taxes on middle class people. >> yes, you can. >> it's the same problem with your itemized deductions. unless you set those itemized deductions way higher than he has set so far, you're going to ding the middle class. >> how about state and local income taxes? that's another run right there. there are so many, jared. it's just simpson/bowles.

why didn't your president -- why didn't he take up the simpson/bowles and run with it? >> this is an important point, jared. jared, let's focus on this, what arthur is saying. everybody in town, everybody in washington has a romney-like tax reform plan, whether it's the brookings tax policy center, they have one. >> he has a 28% -- >> you have simpson/bowles, and now you have the romney plan. your man's the only guy who thinks tax reform means higher tax rates. you're the only one. >> can i please respond here? >> i want you to. >> in every single budget he has produced, there has been a cap on itemized deductions for people above $250,000. they can only deduct the 28%, not 35% or 39%. and it raises half a trillion dollars over ten years. it's in every one of his budgets. please don't tell me it's not. i can show you where it is.

>> arthur laffer, explain this to me. >> the key here is lowering rates. jared, i do agree with you, we need to raise taxes. but we don't need to raise tax rates. what we need to do is increase growth output employment and get -- you can't balance the budget on the backs of the unemployed. it just doesn't happen. >> i agree. art, you are 100% right. and by the way, i'm not where you guys are on the lower -- >> you will be with us soon, jared. >> you're elasticties for your tax rate declines are way too large, in my humble opinion. but i'm ready to go with you if you can identify how you're going to fill that hole. mitt romney has not named one specific in terms of how he would fill that hole. >> he's smarter than that. he's said everything's on the table. he's put strict caps on the value of those deductions. >> i love the idea of caps. it's really good. >> dollar caps, which is really terrific. it means you don't have to abolish it.

you just cap it. and, arthur, there's one other piece he never gets credit for. . he is going to repeal the obama care tax hike which is distorting the baseline. and he's going to repeal the obama care spending increases. in other words, when you look at it -- >> and bring the deficit down substantially. >> exactly. you add economic growth incentives to those policies and changes, then you have -- he'll probably come out with a surplus on tax reform. >> you guys make a decent point when you say if he named -- if he starts specifying the base broadeners, he'll be attacked for them. generally i might agree with you. but in this case, he can't just go say, vote for me, i'm going to wave a magic wand and pay for a $5 trillion tact r tax cut. he has to give specifics. >> all i'll say is mr. obama has no plan and he keeps saying -- his people keep saying that romney is lying and that boils my blood. you can have an intelligent

disagreement without -- jared bernstein, you're a gentleman. art laffer, you're a genius. employees of westgate resorts getting a shocking e-mail from the ceo. get this, quote, if president obama wins reelection, you may be fired. the full story coming up next. that's even tougher than this story. [ male announcer ] at scottrade,

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there's a lot of uncertainty over what a potential second term for president obama could mean for business. but one ceo is very clear what it would mean to his business. cnbc's robert frank joins us with all the details. good evening, robert. >> reporter: good evening, larry. very clear indeed. david siegel, the ceo of westgates resorts sent an e-mail to employees say figure obama wins, they could all lose their jobs. quote, if any new taxes are levied on me or my company as our current president plans, i will have no choice but to reduce the size of this company. he says, you can find me in the caribbean sitting on the beach with no employees to worry about. what makes this e-mail so explosive is that its author is david siegel. the man who built the largest home in america. he and his wife built a 90,000

square foot palace near orlando. he said it's not about his own fortunes. he said, i have enough money to last the rest of my life and for my children. but his workers, he says, are the ones who will be in trouble if obama is elected. he said, quote, i'm not telling them who to vote for, i just want them to be informed when they pull that lever. back to you, larry. >> robert, let me just clarify. is he talking about obama care fees and taxes? because his workers' taxes shouldn't go up under obama. his taxes will go up quite a bit, or is he just talking about himself? >> reporter: no, he's talking about the combined impacts of obama care and taxes. and he says he's already, quote, taxed to death, despite his own good fortune. and he said that he just doesn't want to fight those combined pressures of new taxes in obama care. he said, look, i'm going to call it a day if i get tax increases and obama care. >> all right. very good. thanks to cnbc's robert frank. appreciate it. >> thank you. coming up on "kudlow," is there a romney landslide?

the republican candidate pulls ahead of obama in the presidential race. mitt's pushing hard to peel back supporters from the president. and new numbers out tonight shows he's got obama on the run. all that is next up. [ horn honks ]

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welcome back to "the kudlow report." i'm larry kudlow. in this half hour, the benghazi gate cover-up is moving swiftly into the highest reaches of the state department and the oval office. now there's a circular firing squad pointing fingers at everyone else. plus, is there a hidden obama agenda to shaft the red suburbs and redistribute taxes to the blue cities? guess where it's happening? the battleground state of ohio. but first up, vice president joe biden and paul ryan are cramming for their debate. you can watch coverage of the debate beginning tomorrow here on "the kudlow report." now, past debates have been must-see tv. this one is likely to be no different. cnbc's own john harwood joins us live from lexington, kentucky, with all the details. good evening, john. >> reporter: good evening, larry.

you know, if presidential debates themselves usually don't matter much, and they don't, vice presidential debates almost never do, even though they're fun. but the stakes are higher for this debate tomorrow between paul ryan and vice president joe biden. ryan, of course, is a policy wonk. biden has the experience. but it's not going to be as friendly as this encounter four years ago between biden and sarah palin. >> no cheers, applaud, no untoward outbursts except right at this minute now as we welcome governor palin and senator biden. >> reporter: the reason this is going to be a different encounter is because of all the progress that mitt romney made against president obama in last week's debate. he's gaining in the polls which

puts a lot of pressure on vice president bide ton try to stem that momentum. you can expect some feisty exchanges like we saw in 1984 and four years later. >> let me help you with the difference between iran and the embassy in lebanon. >> i almost resent vice president bush patronizing attitude that you have to teach me about foreign policy. i've been a member of congress for sixth six years. >> i have as much experience in the congress as jack kennedy did when he sought the presidency. >> senator, i served with jack kennedy. i knew jack kennedy. jack kennedy was a friend of mine. senator, you're no jack kennedy. >> reporter: now, larry, i had a great conversation yesterday with former senator bob dole who of course both of us know.

bob dole said he expects joe biden to come out swinging and not to let up. and in this race -- a race this close, this might even make a difference, not a whole lot but enough to measure. larry? >> john harwood, thank you very much. we appreciate it. mitt romney's taken his post-debate momentum straight on to team obama turf. this is interesting. obama's lost his hold on florida, virginia and ohio. those number have now gone to romney. romney has now gone behind enemy lines to challenge in michigan and pennsylvania. that's also new. all this comes as the romney rally continues in the latest polls. rasmussen has romney up by one. investors business daily has romney leading obama by five, 49-44. there's the daily tracking poll. with tomorrow night's debate, won't the inevitable paul ryan victory just send team obama over the edge into the looney bin? well, that's kind of the way i see it. but there may be some disagreement.

we have karen finney, columnest for "the hill." and kate obenshane. ms. finney, this is the way i look t it. romney is smarter than biden. romney is better informed than biden. romney is younger than biden. and romney is cuter than biden. so i think romney's just going to do great in this debate, your thought? >> i assume you mean ryan. >> i did mean ryan, i'm sorry. i take it all back. >> if ryan wants to show those abs, i'm sure the audience would love it. look, there are a couple of things. joe biden will be able to hold ryan's feet to the fire in a way that i don't think anyone else has. and we've heard some of that conversation earlier this evening on your program talking specifically about the budget,

specifically about medicare and medicaid. when paul ryan has said previously, i don't have enough time to walk you through the number, i'm sure he'll be given plenty of time. and remember that biden had what i thought was one of the best moments of the debate season last cycle when he reminded sarah palin and our audience that he was a single father. he himself -- he raised his kids after he lost his wife and his daughter. so he's a good debater. >> look, i think joe biden is a really good man, by the way, personally. a really good man with a great story. but i know him personally and i think he's a really good man. but, kate, if biden tangles with ryan on these budget issues or these tax issues -- and i'm even going to add foreign policy, ryan is going to have him for lunch or dinner or whatever. it's not even going to be a contest. i come back that. i want to add one thing. i mean this in jest but also in truth. i think that paul ryan's youth really makes a positive impression, for the younger voters that romney needs but

just in general. the contrast between ryan and biden is going to be enormous. >> well, particularly after the string of gaffes that we've seen from biden. he is sort of like the doddering old uncle you keep hidden away in the closet. but he's going to come out swinging and he's going to come out with a lot of one-liners. he might to bring in the personal side like he did against palin. but this entire campaign has shifted. it's very focused right now on ideas, on the defense of the ideas, bold ideas, as romney articulated last week. he changed the whole narrative. the obama campaign's effort to undermine it by these silly attacks, republicans can't stand young people, they want to kick them off their parents' health care, they want to go after women, the war on women. and now the new option, they're going after big bird, oh, my gosh. it's silly. >> when paul ryan says that the fullest extent of his experience

in foreign policy is that he's voted to send people to war, when you've got joe biden whose son not only served for a year but also as a senator from delaware, he's been out there at dover sending troops off, welcoming home those caskets and not to mention he has a foreign policy expert. >> is he really a foreign policy expert? every single position that joe biden has taken on foreign policy issues for his career has been wrong. he has opposed every positive step we've taken in foreign policy. so bring him on when it comes to foreign policy. i hope that he actually does. >> the one thing you haven't mentioned on foreign policy, the one thing that's really going to hurt is benghazi, which i am calling benghazi-gate. the democrats have so much trouble because it turns out -- we're going to cover this in the next segment. all the stories immediately after the killings of our ambassador and the others, the stories, the whole spin was completely and utterly wrong.

and ambassador rice right up to hillary clinton, right to the oval office, you got a big problem, karen finney. i hate to say it. what's the difference between a falsehood and a lie. that may come up in this debate. it's not a big difference. and i think you all have a big problem on foreign policy because of this. >> but, larry, let's be clear. in the heat of a campaign, people want to call these lies. okay. but the truth may be very different. and let's remember, there is an ongoing investigation. if people had bad information that they passed along initially -- >> oh, my goodness. >> that's a problem. that does not necessarily mean people are lying. >> oh, come on, karen. they went out there and they systematically told things that all of us knew weren't true 24 hours after the attacks, they knew they were terrorist attacks and told the american people a complete lie. you tell the american people -- >> you have multiple factions -- i'm suggesting i would rather have the truth than to see

somebody score political points on this. >> karen, the truth is one thing. >> i think americans are going to -- like the mother of that fallen navy s.e.a.l., i don't think americans are going to appreciate mitt romney politicizing -- >> karen, hang on one second. i don't like using that word, in fact, i never do. the word "lie" about a policy disagreement. never. that's wrong. i think that's dead wrong. and i think, by the way, team obama has been very unfair to mitt romney on these taxes. but, karen, when we see the evidence and data coming out that kate just talked about and particularly yesterday with the state department acknowledging that there never was any protesters and it was never about this video, when you see that come out and you know that the survivors of that al qaeda invasion of the embassy, the survivors immediately cabled or texted or messaged to the state department to tell them what happened. i would say within 24 hours the

state department and the white house knew. and, karen, you're going to have -- i don't mean you personally. but your team is going to have to answer to that. that is a tough one. once americans hear that in greater detail, i think that's a tough one. i want to give you one last shot, karen, and then kate. karen, you first, please. >> well, again, i think joe biden is going to do an excellent job tomorrow night mostly because he has command of the facts and the information. but he can told paul ryan's feet to the fire particularly on the economic conversation because he was there when ryan walked out. >> kate, last word. >> he's going to eat him -- ryan is going to eat biden for lunch when it comes to the economic issues and when it comes to libya, it's indefensible that a week later they spent $70,000 to advertise in pakistan apologizing for a youtube video that they knew darn well had nothing to do with the murder of our ambassador. >> you're both terrific. thank you very much for coming on. you can watch coverage of the vice presidential debate tomorrow night beginning with

"the kudlow report" at 7:00 p.m. eastern. one of my special guests is going to be newt gingrich. i'm sure there will be others. coming up, does barack obama have a secret plan to redistribute suburban taxes to inner cities? beware suburbanites in swing counties. that may mean you, ohio. all that up next. i'm bara ck o bama, and i approve this message.

"i'm not in favor of a $5 trillion tax cut. that's not my plan." mitchell: "the nonpartisan tax policy center concluded that mitt romney's tax plan would cost $4.8 trillion over 10 years." vo: why won't romney level with us about his tax plan, which gives the wealthy huge new tax breaks? because according to experts, he'd have to raise taxes on the middle class - or increase the deficit to pay for it. if we can't trust him here... how could we ever trust him here?

sure, we know winning ohio is critical. but the real fight is happening on smaller turf. in parts of the state, it's really predictable. for obama or for romney. but hamilton county could go either way and might decide it all. >> that was nbc's kelly o'donnell reporting on the key battleground state of ohio and in hamilton county and around the state, obama is pushing an agenda for jobs and the middle class in the suburbs. but it could actually hurt the suburban middle class. we have stanley kurtz with us. your message is obama is in fact going to rob the suburbs to pay the city. in brief, stanley, how does he do that as president? >> well, larry, there's a practice called regional tax base sharing that obama would like to spread to every metropolitan region in the country.

this is where all the suburbs in a metropolitan area have to kick in a big chunk of their tax money and that gets redistributed to cities. ohio has a lot of folks that would like to see that practice come to the state. >> cleveland, right? maybe even hamilton county, which is cincinnati which has its urban problems. >> that's right. but they're centered around the northeastern area around cleveland. they made a good run at it and came close in the legislature in 2009. >> that's what i wanted to get at. i have no correct you're right about president obama's hidden agenda. but at the end of the day, if these states and localities don't want to do that, they don't have to do that. in 2010, the tea party stopped tax sharing and they were also able to stop a lot of the regional planning. it's really kind of a local issue. you have to mobilize the local native, don't you? >> the thing is president obama has ways of getting around that. for example, by rights, president obama should have nothing to do with local school curricula. and yet 46 states have signed on

to what in effect is -- >> i think you're dead right on education. it was the other stuff that i had problems with. >> he's got something here called the sustainable communities initiative. it's federally funded. and when the plans under this initiative are issued in 2013, he has the option to do the same thing he did with education. he could say, hey, if you don't follow the plans we've funded through these local groups funded through the federal government, you might not get all your federal aid. >> but can't governor kasich and these county executives, can't they just stop all that with votes? it's a democracy, they can say no to this? >> sure. but say obama gets reelected and kasich loses reelection to a democrat in 2014, this thing came real close to passage in 2009-2010. if obama's in place, then a democrat gets the governor's chance. it has an excellent chance of passage in a second term.

>> more local tax sharing. >> absolutely. >> thanks to stanley kurtz. our next story, did president obama, secretary of state hillary clinton and u.s. ambassador susan rice all lie about the 9/11 benghazi attack? today, sworn testimony in congress sure makes it sound that way. i hate to report it but it is true. full details up next. either lies or falsehoods. t wors a tall order. up your game. up the ante. and if you stumble, you get back up. up isn't easy, and we ought to know. we're in the business of up. everyday delta flies a quarter of million people while investing billions improving everything from booking to baggage claim. we're raising the bar on flying and tomorrow we will up it yet again.

in regards to stanley kurtz's comments about common core in the last segment, we asked the national association of governors which created the initiative, for comment. we did not get a response. if we do, we'll report it to you. now let's turn to a major story today. house republicans demanded answers from the obama administration on why it seems they covered up the organized terror attack on the benghazi embassy a month ago. nbc's own steve handelsman joins us from washington with the details. good evening, steve. >> reporter: larry, good evening to you from capitol hill. there were more questions today here from republicans and not only republicans about what some see as an attempt by the obama administration to cover up an al qaeda comeback in libya. but mostly the hearing was about a far simpler issue -- why were so few american armed forces assigned to protect american diplomats in such a dangerous place? to highlight his concern,

president obama had his terrorism adviser john brennan in libya today to push the investigation of the 9/11/2012 attacks that killed u.s. ambassador chris stevens and three others. but republicans at the house hearing charged the obama state department showed a lack of concern last summer after u.s. facilities in benghazi were attacked twice. >> i believe personally with more assets, more resources, just meeting the minimum standards, we could have and should have saved the life of ambassador stevens and the other people that were there. >> reporter: one of the witnesses agreed. lieutenant colonel andrew wood ran embassy security till august. >> the situation remained uncertain and reports from some libyans indicated it was getting worse. >> reporter: just five u.s. agents protected the main u.s. compound. staffers recommended more. >> there wasn't sufficient resources provided. >> that was one of the main reasons i continued to ask for those resources, yes. >> reporter: but back in

washington, deputy assistant secretary of state charlene lam said, no. >> sir, we had the correct number of assets in benghazi at the time of 9/11 for what had been agreed upon. >> saying you had the correct number and our ambassador and three other individuals are dead and people are in the hospital recovering because it only took moments to breach that facility somehow doesn't seem to ring true to the american people. >> reporter: the state department now says two u.s. compounds were hit that night, one by a mortar that killed navy s.e.a.l.s who tried to save the ambassador. the white house again today denied any intentional cover-up in the weeks after the tragedy. >> steve, i just want to ask you. the state department last night came out with whatever it is, defensive statement, whatever. but their spokesman said with great clarity that there was no protest about a videotape that everyone's talked about. in effect, that undermines the

susan rice story, undermines hillary and president obama. this is from the state department. this is what we've known. this is a cover-up or a falsehood or something that is going to blow up. >> reporter: i don't know about blow up, larry. but susan rice was wrong. the president was wrong. hillary clinton was wrong when they said weeks ago what they said. state department now acknowledges that. but the white house insists it never intentionally lied. they say they told the truth as they knew it all along. >> we're going to leave it there. steve handelsman, thanks very much. there wasn't a riot over some youtube videotape. it was an organized terror attack. and, yes, inadequate security. so the question is, what did the president and hillary clinton know and when did they know it? with all this sworn testimony, this really does smell of a cover-up. let's go to our distinguished guest, former deputy assistant secretary of defense, peter brooks, who worked in the bush administration. right off the top, peter s this a cover-up?

>> it has an appearance of a cover-up. i think congress has to tell us more. but it doesn't look good. i think we deserve better as an american people here and this has been a disgrace and it's a travesty of trust. we deserve better from the administration from day one on this. >> one of the things i'm reading, besides the fact that everyone began to know within 24 hours that this was not a protest about this silly video, that this was an al qaeda-related attack, in fact, it's happened at 9:30 p.m. that night. it came completely as a surprise. besides that, there's also in the press and i'll ask your view on this, that the white house and the state department decided together in collusion not to put extra security in the benghazi consulate because they didn't want to give the appearance of war or hostility. in other words, that they consciously decided not to put security in. can you confirm or deny that? >> i can't confirm it.

the testimony today stands on its own. that's the appearance to me is that we did not have enough security. five security people to go against -- to protect this compound in what is a very wild, lawless area of libya, i think is a major mistake. and i think we've seen the results of this, larry. the last thing this administration wanted to do is admit that they may have had a terrorist attack on 9/11 on their watch. and that's the whole problem here. and if it weren't for the congressional hearings prior to this, larry, when they asked the director of the national counterterrorism center whether it was a terrorism attack, they would probably still say it wasn't a terror attack. and the state department came out last night probably because of this hearing today. congress really has to get at this. >> it has to be both houses and both parties have to get on this. look, peter, we just know certain things now. we know that this story, this spin that was delivered or days and days and days -- president

obama did it at the united nations, which blew me away. hillary clinton has used it. and of course ambassador rice has used it. this spin was all wrong. there was no protest. it wasn't a bunch of amateurs protesting over a video. this was an armed, pre-planned attack. we know that now beyond a shadow after a doubt. you know from working in the defense department, if this attack came, the survivors in the consulate, the first thing they're going to do if they're physically capable of doing it is somehow cable or text message the state department with what happened. that's what you do in these situations. so they would have known that night in washington, d.c. >> look, larry, this undermined -- this tragic event in libya undermined the narrative that the obama administration has been pushing for a long time, that they're on top of the issue of terrorism. remember, gm is alive and osama bin laden is dead? well, i have news for them. al qaeda's alive and they're probably responsible for the deaths of four americans in

libya. this undermines the strength of that narrative. >> it is possible they knew that night because the survivors would have done their best to communicate this to washington, d.c. if not the defense department, certainly the state department, peter. that's how that game works. they would have known that night. >> no argument there. but they could have said, we don't have all the details yet. but instead they decided to spin this yarn and tell us this story that supported the idea that they were strong on national security issues and that, oh, my goodness, we may have had a terrorist attack on the 11th anniversary of 9/11. that's where i come down on it. >> so meanwhile, president obama has not spoken to the press since benghazi. actually i read today that joe biden hasn't spoken to the press in five months, no realistic press conference. mrs. clinton has sort of been in and out on this. but her role seems to be she's up to her eyeballs in the problem here. but ultimately, peter, this stops at the oval office, does it not? the buck stops there. >> well, can you blame them?

can you blame them for not talking to the press about this? because it's a mess. and it's a national disgrace. >> peter brooks, you're terrific. thanks for helping us out. watch coverage of the vice presidential debate tomorrow night beginning with "the kudlow report" at 7:00 eastern. special guest, among others, newt gingrich. that's all we have tonight. thank you very much for watching. tomorrow's big night, this vice presidential debate is going to matter quite a bit. i'm larry kudlow. we'll see you next evening. 1-800 let's talk about low-cost investing. tdd#: 1-800-345-2550 at schwab, we're committed to offering you tdd#: 1-800-345-2550 low-cost investment options-- tdd#: 1-800-345-2550 like our exchange traded funds, or etfs tdd#: 1-800-345-2550 which now have the lowest tdd#: 1-800-345-2550 operating expenses tdd#: 1-800-345-2550 in their respective tdd#: 1-800-345-2550 lipper categories. tdd#: 1-800-345-2550 lower than spdr tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 and even lower than vanguard. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 that means with schwab, tdd#: 1-800-345-2550 your portfolio has tdd#: 1-800-345-2550 a better chance to grow. tdd#: 1-800-345-2550 and you can trade all our etfs online, tdd#: 1-800-345-2550 commission-free, from your schwab account. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 so let's talk about saving money,

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